Did you know?
- Small Business Trends reported that 60% of small businesses feel they are not very knowledgeable about accounting, which can lead to costly mistakes if they attempt to handle it alone.
- National Small Business Association (NSBA) states that 40% of small business owners cite bookkeeping as a primary stressor, with many spending over 80 hours a year on financial tasks alone.
- According to the IRS, small business owners in the U.S. face a 40% likelihood of an audit error due to missed deductions or improper records, underscoring the need for expert support.
Outsourcing bookkeeping has become an increasingly popular solution for small businesses aiming to optimize operations, reduce costs, and maintain precise financial records. With access to professional services at a fraction of the cost of in-house accountants, small businesses can achieve accuracy and compliance while focusing on growth. Here, we explore the benefits of outsourcing bookkeeping and highlight real-world examples of accounting challenges across various regions.
1. Cost Savings
Outsourcing bookkeeping services can save businesses up to 50% on bookkeeping costs by reducing or eliminating full-time salaries, benefits, and training expenses. According to a report by the National Small Business Association, small businesses spend an average of $83,000 annually on payroll for in-house accountants. By outsourcing, they can direct these resources toward essential growth initiatives.
For instance, a startup in Calgary shifted from in-house to outsourced bookkeeping. Previously, financial accuracy was hindered by high payroll costs and frequent errors due to inadequate training. By outsourcing, they significantly reduced their expenses and benefited from error-free bookkeeping, allowing them to focus on expanding their service offerings.
2. Access to Expertise
Small businesses often struggle to hire highly qualified accountants due to budget constraints, which can result in inaccurate or incomplete records. Outsourcing provides access to experienced bookkeepers and accountants who are well-versed in tax laws and best practices.
Consider a boutique retail business in Victoria. As sales increased, the business faced challenges with VAT compliance and financial reporting. Hiring a local or outsourced accounting firm helped them navigate VAT complexities and ensure compliance, something they couldn’t achieve with limited in-house expertise.
3. Enhanced Accuracy and Reduced Errors
Bookkeeping errors can be costly, especially if they result in tax penalties. An IRS report states that tax-related penalties for small businesses cost an average of $845 annually, not to mention the time spent rectifying errors. Outsourcing firms provide dedicated teams to monitor transactions, making it easier to avoid such mistakes.
An example can be seen with a small Canadian construction company that experienced frequent payroll errors and reconciliation issues. After outsourcing, payroll accuracy improved significantly, and reconciliations were handled smoothly, saving the business time and avoiding costly penalties.
4. Improved Compliance with Local and International Regulations
Compliance is challenging for businesses operating in different regions, especially with changing tax laws. Many outsourcing providers specialize in global compliance and stay up-to-date with changing regulations, ensuring businesses avoid penalties or fines.
A tech startup in Ontario expanded its operations across the USA and faced challenges in complying with different tax regulations. With an outsourced bookkeeping partner, they could handle taxes for each location, ensuring adherence to the rules in each state.
5. Flexibility and Scalability
Outsourcing bookkeeping offers scalability that in-house teams cannot. Businesses can quickly scale up or down without worrying about layoffs or hiring during peak seasons.
For example, a seasonal tourism business in Washington, DC, benefited from outsourced bookkeeping by adjusting its financial support during peak seasons. By not having to maintain a full-time in-house team, they optimized their budget while maintaining smooth operations throughout the year.
6. Enhanced Focus on Core Business Activities
Small business owners wear many hats, and handling bookkeeping on top of everything else can be overwhelming. Outsourcing frees up time to focus on core business areas, enhancing productivity.
A bakery in Texas struggled with financial management while balancing production and customer service. By outsourcing, the owner could focus on creating new products, improving customer satisfaction, and increasing sales while experts handled the bookkeeping.
7. Access to Advanced Tools and Technology
Many small businesses need more money to invest in advanced accounting software or tools. Outsourcing firms, however, use up-to-date technology like QuickBooks, Xero, and other cloud-based platforms that provide real-time financial insights.
A California manufacturing business that outsourced its bookkeeping gained access to software for accurate inventory tracking and budgeting, which helped the company manage production costs and improve efficiency.
8. Disaster Recovery and Continuity
An outsourced provider offers a level of security and continuity that in-house teams may need help to achieve. Outsourced services typically back up financial data regularly, reducing the risk of data loss.
For instance, a Virginia-based hospitality business suffered severe data loss during a hurricane. With their outsourced bookkeeping partner’s cloud-based system, they recovered all financial data, which helped them get back on track without suffering significant financial losses.
Concluding thoughts
Outsourcing bookkeeping is a powerful tool for small businesses looking to save time, ensure accuracy, and stay compliant. By working with seasoned professionals, business owners can focus on growth and strategy while leaving the financial details in capable hands.
At Glocal Accounting, we specialize in supporting CPAs and accounting firms with seamless bookkeeping services so they can serve their clients effectively without the operational burden. Our solutions provide a trusted partnership, offering top-tier bookkeeping expertise to streamline workflows and enhance service offerings. With Glocal Accounting, you get a reliable back-office partner to help your firm deliver excellence, ensuring your clients’ success—and yours. Explore further: www.glocalas.com
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